accessing global growth through multi-national companies
2 Aug 2011
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Here we take a look at why ipac believes exposure to multi-national companies has the potential to benefit ipac diversified portfolios. Even though many large companies are domiciled in European countries (eg Nestlé) or the United States (eg Proctor & Gamble), multi-national corporations have grown their businesses and revenue streams across the globe.
multi-national companies have a global foot print
Proctor & Gamble is an example of a multi-national company that has expanded globally. While Proctor & Gamble is based in the United States, its sales come from over 250 well-known brands that are sold in more than 180 countries. Investing in Proctor & Gamble is a way to access growth, not just in the US, but in over 180 countries.
The graph below shows the geographical diversification of Procter & Gamble’s net sales. In addition to a wide regional exposure, the company generates 34% of its net sales from emerging markets. In these markets, economic growth is expanding at two or three times the pace of the global average. There are a growing number of consumers in emerging markets who buy millions of products each year.
Another example is Wal-Mart. In 1999, Wal-Mart’s international sales were 10% of total sales or $US 12 billion. In 2010, Wal-Mart’s international sales were 25% of total sales or $US 100 billion. There are many examples of multi-national companies with similar qualities. In fact, the multi-nationals ship over 60% of their merchandise to fast growing emerging countries.
multi-national companies have a dominate position in the market
Another important point is that the multi-nationals typically are market leaders. Looking again at Proctor & Gamble’s we can identify many familiar brands, such as Gillette, Oral-B, Olay and Pantene. These are billion dollar brands with a deep market share. Proctor & Gamble has 70% of the global market share of razorblades. Proctor & Gamble is also the global market leader in hair care, with over 20% of the global market.
This type of global exposure and product depth helps multi-nationals generate profits and sustain financial strength. They have the flexibility to manage changes in economic growth, tax rates and labour trends.
ipac captures returns from many sources in our International Shares sectors. Multi-national companies are only one area where we direct our managers to target opportunities. To learn more about how ipac combines fund managers to capture opportunities when investing in international shares, click here to read our newsnote on how ipac restructured our international shares sector.